As the Bitcoin price approached parity with the gold price, the significance of the price event elicited much debate in the Bitcoin Community. While many bitcoiners take bitcoin-gold price parity as evidence of the digital currency’s continued success, some analysts suggest the event is meaningless.
“What is even a troy ounce?” Josh Crumb, Bitgold (now Goldmoney) co-founder and CSO, tells Bitcoin.com. “Is it the same unit as a bitcoin? The value is not truly at parity, as gold is still a 322 times larger market than bitcoin,” he reasons. “If some other company achieves the same share price as Apple, you don’t say it’s reached parity with Apple. You have to look at the market capitalization.”
Mr. Crumb Questions What One Unit of Troy Ounce Gold Represents When Compared to One Bitcoin
“Comparing the bitcoin and gold price is meaningless,” he concludes.
As a gold bug, analyst for gold dealer Miles Franklin, Andy Hoffman, long looked at the bitcoin price next to the gold price with a bit of longing. It had been so successful so fast.
“I remember back in May 2016, on a chart, a cup and handle formation in bitcoin had formed since the Mt. Gox crash,” the monetary expert tells Bitcoin.com “It looked like the chart for gold, but going all the way back from 1980 to 2005. So, bitcoin’s chart looked like gold, but took just three years to form, while gold took an entire 25 years to form. There are a lot of similar kinds of things going on because of technology advancing so rapidly, and fiat currencies declining so rapidly. Bitcoin’s learning curve in terms of storage value and currency has been faster.”
He adds: “Gold and silver are the tortoise, and bitcoin is the hare. It’s growing so fast as a new technology. All-in-all, Bitcoin, gold and silver are fighting the same fight, and along the way bitcoin is going to take a lot of flak.”
There is Some Correlation Between Gold and Bitcoin Prices
“We do see a lot of interesting patterns whenever gold and bitcoin move independently,” BitStamp CEO Nejc Kodrič tells Bitcoin.com. “If you look at both graphs, whenever gold is rising and bitcoin is falling, we here at Bitstamp see bitcoin volume increase. People sell bitcoins to buy gold. The reason for it is, those who do this still find gold to be valuable as the oldest and the best old form of value. Gold is still the safehaven for many bitcoiners. We are seeing more and more people realizing the complementary aspects between gold and bitcoin.” Bitstamp allows clients to take physical gold delivery when selling bitcoins.
By 2013, Bitcoin, Long-Called Digital Gold, had Attracted Many Young Gold Investors
Mr. Kodrič believes: “Parity is a monumental moment in time because it is happening for the first time.”
Many contend the two have a symbiotic relationship, as gold banks have studied blockchain technology and how it could improve gold storage and accountability. As well, Bitcoiners have created physical silver and gold coins backed by bitcoins.
Some contend that, if Bitcoin fails as a medium exchange due to scalability issues, then it could still succeed as a digital store of value – that is, a ‘digital gold.’
Images courtesy of the Shutterstock, XE.com